The revival of the sugar market was short-lived. After the peak in mid-February, the sugar price is back at the November level this week. The corona crisis is leaving its mark, but what else is going on?
The final sugar price on the Liffe in London managed to remain just above €300 per tonne this week. The price fluctuates between €302 and €312 per tonne. A quotation that we also saw last autumn. This means we have now left the €413 per tonne of February 12 far behind us.
Pricing is a matter of supply and demand and both seem to be significantly disrupted. The global outbreak of the coronavirus is having a major impact. For example, demand from the so-called out-of-home segment has virtually come to a standstill, due to the closure of catering and sports canteens and canceled events. Among other things, fewer soft drinks are consumed. Greater home consumption can only partly compensate for this.
40% less sugar in Thailand
How long this situation will last is a big question mark for everyone and that uncertainty has a depressing effect on the sugar price. In addition, the market is awaiting the harvest in the major sugar producing countries, which is still largely unclear.
An exception to this is Thailand, the world's largest sugar producer after India and Brazil and also the largest sugar exporter in Asia. The harvest is already over in the country. As expected, the yield is significantly lower due to drought and a smaller area. Traders speak of a decline of more than 40% and that has an impact on global stocks.
Export India on one ear
Now eyes are on India and Brazil. In India, the largest global sugar producer with a production of 33 million tons, the lockdown has far-reaching consequences. Farmers do not have hands available for harvesting various crops. Transport also encounters major problems. India's ports are facing a serious labor shortage. Market experts report that container transport has virtually come to a standstill.
Even before the lockdown, India had revised down its sugar export estimates for 2019/2020 (to 4,5 million tonnes). The low sugar price already made overseas exports largely unprofitable.
Less ethanol, more sugar in Brazil
But Brazil has the biggest impact on global sugar supplies. The second largest sugar producer (29 million tonnes in 2018-2019) accounts for around 40% of global sugar trade. It is therefore not surprising that the global sugar market keeps its eyes on the harvest in the country. This started at the beginning of April and a good harvest is expected.
Sugar cane is processed into sugar and/or ethanol in Brazil, depending on sales prices. While sugar prices are under pressure, fuel prices worldwide have also plummeted as a result of the corona crisis. Unica, the organization of sugar cane processors in Brazil, expects that 44% of the harvest will be used for sugar production this year, compared to 34% last year. That would mean considerably more sugar. Traders warn that higher sugar production in Brazil could lead to a global surplus in 2020-2021.